The foreshortened holiday week looks to be a slow one for corporate news. However, a Good Friday holiday announcement could provide some direction on the future direction of interest rates, says Jay Woods, Chief Global Strategist at Freedom Capital Markets.
He highlights the upcoming release of the Personal Consumption Expenditures (PCE) index, the Federal Reserve's preferred inflation measure.
"The market won’t be able to react to this number until April," Woods points out in his weekly newsletter. "A PCE number in line with expectations will help bolster Jerome Powell’s talk that we are 'close' to a rate cut."
Economists expect the PCE to remain stable at 2.8% year-over-year. Current projections show a slim chance of a step down in the cost of borrowing at the May meeting but a significantly higher likelihood in June, following a shift in the odds from 59% to 73%.
"As for the Fed, we consistently get the same narrative but it keeps working," notes Woods. "This seems to mean that boring and predictable commentary from Jerome Powell will remain music to the market's ears and keep this rally alive."
Indeed, boring and predictable has led to equities hitting 20 new all-time highs this quarter, Woods points out.
Turning to the corporate sector, the energy sector stands out, with the Energy Select Sector (XLE) on the cusp of a major breakout, driven by sustained oil prices above $80, Freedom's equity strategist points out.
The performance of ExxonMobil and Chevron, which together account for 40% of the XLE, will be crucial in determining the sector's direction. With both companies showing signs of upward momentum, a continued rise could signal a leading role in the sector's breakout.
On the earnings front, the week is expected to be one of the slowest in recent memory, with attention turning to Carnival Corp (NYSE:CCL) and Walgreens Boots Alliance Inc (NASDAQ:WBA, ETR:W8A).
Carnival, despite facing challenges in returning to pre-pandemic levels, aims to surpass EPS projections for the sixth consecutive quarter. Meanwhile, Walgreens, trading at its lowest since 1998, faces a pivotal moment that could determine the future trajectory of its stock.
"Will this be the quarter that things finally turn around for the retail drugstore chain?" asks Woods.
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